Food loss and waste (FLW) generated by unsustainable linear food systems are major contributors to greenhouse gas (GHG) emissions. Although microalgal lipid production has advanced significantly for applications such as biofuels and high-value polyunsaturated fatty acids (PUFAs), the use of FLW as an alternative feedstock to cultivate lipid-rich microalgal biomass within a circular bioeconomy remains insufficiently explored. This review critically evaluates the feasibility of converting FLW into nutrient-rich media for microalgae cultivation, with particular focus on its effects on biomass productivity and lipid accumulation. Pre-treatment methods for food waste are essential to enhance nutrient recovery, especially of carbon sources, and significantly influence subsequent microalgae cultivation. These methods affect the bioavailability of key nutrients, particularly the carbon-to-nitrogen-to-phosphorus (C/N/P) ratio, which regulates metabolic pathways involved in lipid biosynthesis. Despite encouraging laboratory-scale outcomes, large-scale implementation remains constrained by feedstock heterogeneity, high energy demands during harvesting and lipid extraction, and regulatory challenges. To overcome these barriers and facilitate scale-up, this review highlights integrative strategies such as metabolic engineering, automated cultivation systems, and a closed-loop microalgae-based biorefinery. Moreover, life cycle assessment (LCA) is emphasized as a tool to assess environmental performance and inform policy decisions, supporting alignment with Sustainable Development Goals (SDG 12 and SDG 13).